SBJ/June 9-15, 2014/Labor and Agents

Filings: EA’s payments to NFLPA plummet

In the two years before the 2011 NFL lockout, Electronic Arts, which sells the hugely popular “Madden” video game series, paid the NFL Players Association $68.6 million for the rights to use images of NFL players. EA had long been a primary source of group licensing revenue for the union, along with jerseys and trading cards.

In the last two years, through Feb. 28, 2014 — the first two full years since the lockout ended — EA paid the union a total of $4.5 million, according to the two most recent annual reports filed with the U.S. Department of Labor. 

What caused the drop? The answer is not entirely clear. 

The NFLPA declined for the second year in row to comment about the lower payment from EA. 

The NFLPA received $2.2M for 2013, the year Madden 25 hit stores.

EA, per its policy, declined to comment on the financials of licensees.

It has, however, been suggested by analysts that the NFLPA may have arranged to front-load its contract with EA before, and during, the lockout — with the lockout period being a point at which the NFLPA did not have to disclose its financials because it was not operating as a union during that time.

There are 1,959 active player members of the union, according to the most recent annual report, filed late last month with the labor department, so the drop in revenue over the two reporting years represents on average tens of thousands of dollars per player. 

“The license was intended to cost EA around $50 million annually, with some portion going to the NFL and another portion going to the NFLPA,” said Michael Pachter, who follows EA as managing director of research at Wedbush Securities. 

“The game generates around $240 million in annual revenue, and a 20 percent royalty is the very high end for deals like this. Professional sports leagues have the added issue of the athletes’ likenesses [and names] and the league each being intellectual property, so they tend to negotiate a split of the revenues. I don’t know how it is split, but it probably is similar to bargaining on TV contracts, so around 50-50.”

The drop in EA revenue for the past year, as in the previous year, drove overall NFLPA licensing revenue below the levels of pre-lockout years, though the sum was up slightly from last season. According to an analysis of the union’s report, revenue from licensing, marketing and sponsorship came in at $103.7 million for the year ended Feb. 28, 2014, up from $98.6 million the year before. 

In the year before the lockout, revenue from licensing, marketing and sponsorship was $126.9 million, and the sum was $114.6 million the year before that.

The primary revenue contributor in the most recent year was the NFL itself, which under the collective-bargaining agreement pays the union for player images and not to compete against NFL sponsors. In the most recent annual filing, the NFLPA reported the league paid the union $47.3 million, up from $44.5 million the year before.

Trading card companies Panini and Topps paid the NFLPA $25 million collectively, while Nike paid the union $14 million for licensing rights.

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